The Alliance: Moving Healthcare Forward with Innovative Provider Contracting

The Alliance practices innovative provider contracting to purchase high-value, safe healthcare for our employer-members, their employees and their families. We contract with over 38,000 doctors and healthcare providers across the Midwest. This helps self-funded employers design custom provider networks for their benefit plans. We also continuously expand our provider networks and improve contracts to offer employers even more choice, control, and cost savings.

Below are a few ways we contract with providers to improve the value of healthcare for patients and employers.

Direct Contracting

Direct contracting is an innovative provider contracting strategy where healthcare is purchased directly from a provider. The term “direct contracting” is relatively new, but the concept is not. In fact, we’ve been using innovative contracting directly with providers on behalf of our employer-members for almost 30 years.

The Alliance began direct contracting in Dane County, WI in the 1990s. We expanded into new geographic markets at the request of our employer-members. We partner with our employer-members to best meet their needs and the needs of their employees and family members. As we grow, The Alliance’s bargaining power becomes stronger so we can better negotiate fair prices.

We also contract directly with providers for bundled procedures and tests. This offers a single upfront price that covers multiple elements of the surgery or test.

Reference-Based Contracting by The Alliance

There is a lot of variation in healthcare prices today, with different providers charging varying amounts for comparable services. The Alliance uses Medicare as a benchmark for fair pricing – what we call Referenced-Based Contracting by The Alliance^®. We do this instead of negotiating discounts off a provider’s “billed charge”. Medicare is a good reference because it is the largest purchaser of healthcare in the US. It also has established base rates for various services. Medicare adjusts their rates by provider to factor in geography, patient mix, and quality metrics. We’ve implemented Reference-Based Contracting in over 80% of our contracts and new contracts use this methodology.

Paying providers a percentage of Medicare gives us an appropriate benchmark by which we can measure relative value. And this enables employers to use plan design to incentivize employees to utilize low-cost, high-quality providers. Changing incentives will eventually disrupt our healthcare system. Ultimately improving quality, increasing access, and reducing the cost of care for patients and their self-funded employers.

Bundled Pricing

The Alliance’s flexible technology allows us to utilize multiple pricing strategies based on the needs of our employer-members. In some markets, we’ve negotiated bundled pricing for surgical and diagnostic procedures.

Bundling means we’ve negotiated a single price that covers multiple components of care required to provide a procedure or test. The price is known up front. This lets the employer decide whether it’s worthwhile to offer incentives to encourage their employees to use the bundled provider.

This benefits the employer but it’s also good for the employee. There is a broad industry and market push to perform these services in outpatient hospitals or ambulatory surgery centers (ASCs). Medicare now allows total hip and knee replacements to be performed in outpatient settings. The Alliance serves a population that is typically younger and healthier than Medicare patients. Many of our patients are eligible to utilize these services outside of the traditional acute-care setting. There is even research that shows that, when appropriate, outpatient settings improve patient outcomes. They get on their feet quicker, and the risk of infection is decreased.

Surgeries and tests that work well as part of an outpatient bundle typically share three characteristics:

1. THEY ARE NON-EMERGENT Because they are not emergencies, patients have time to compare providers in advance. The service is “shoppable.”
2. THEY CAN BE MOVED to an outpatient setting while still receiving quality care.
3. THEY ARE COMMODITY SERVICES Commodity services are frequently performed by numerous providers in various sites of care. Prices for these services can be easily compared across provider types.

The bundles we sign are part of our work to align incentives for high-value healthcare. Our goal is to have sustainable, predictable pricing for all employer-members of The Alliance.

Moving Healthcare Forward

Our goal is to align incentives for patients, for providers and for employers. To do this,

• We need patients to be engaged and active participants in their healthcare.
• We need employers who are willing and ready to partner with provider organizations that offer and demonstrate value.
• And we need providers to be engaged and want to work with local employers and take care of local patients.

The Alliance offers customizable networks – Smarter Networks^SM so employers can incentivize and guide their employees toward high-value providers to maximize their plan savings. We can support up to four provider network tiers. These range from preferred, offering the best value, to comprehensive, offering the most choice.

High-value tiered networks benefit employees through low, or no-cost care in preferred tiers. By knowing the up-front costs of care, employees have the information they need to make smarter healthcare decisions. Employees are free to seek care wherever they feel most comfortable. Tiering incentivizes employees to seek care where the quality is good, and price is low.

We continue to expand our provider networks and improve our contracts. This offers employers, their employees, and their families the most choice and control over their healthcare.

Contact us to learn how The Alliance’s innovative provider contracting can increase the value of healthcare for your employees.